Thinking about Change
Every great enterprise started with an ambition to create value for someone, to provide a product or service that captures the attention and spending of a demanding consumer. Successful ventures find more resources to reinvest into creating yet more value, improving the product or service to better meet that initial demand that inspired them to roll up their sleeves and create something. The problem, however, is that not only are the consumers demanding, but the demands change as the marketplace evolves and consumers have more choice.
”Business itself has fundamentally changed as the modern marketplace has given the consumer more choice and the ability to raise their own standards”
In an influential article in the Harvard Business Review back in 1993, Michael Treacy and Fred Wiersema made the claim that business itself has fundamentally changed as the modern marketplace has given the consumer more choice and the ability to raise their own standards.
“In the past, customers judged the value of a product or service on the basis of some combination of quality and price,” they claimed, continuing to explain that“ [modern consumers], by contrast, have an expanded concept of value that includes convenience of purchase, after-sale service, dependability, and so on.”
”One has to make the ability to change alongside the changing marketplace a core ambition”
If one is to have sustainable and long-lasting success, then, one has to make the ability to change alongside the changing marketplace a core ambition. The company that wishes to stay relevant and competitive cannot simply focus on living up to the standards they set out for themselves at the founding of the company, but have a living culture that evolves in a competitive environment.
The influential article by Wiersema (left) and Treacy (right) inspired a new way of thinking about corporate differentiation and change.
Twenty-five years later, the need for change is a recognized reality and the topic of many excruciating board meetings and insincere internal memos. Change is difficult and complex because an organization is not made out of strategies and PowerPoints, but rather out of all the behaviors that add up to the sum of the company’s output. Peter Drucker famously quipped “Culture eats strategy for breakfast”, and that is why change can seem all but impossible.
Without the ambition and tools to nudge our everyday behaviors, and build change into the culture itself, change will remain a disconnected manager’s pipe dream and the tired sigh of employees that have heard it all before.
The Vertigo of Change
One of the problems plaguing organizations is the vertigo that comes with envisioning a change in the real world of flesh and bone and routines. Once we leave the safety of our imaginary Powerpoint manifesto, we are faced with the stark reality that there is a lot to do, and it can be very difficult to know where to start.
This vertigo affects us even in much smaller day-to-day situations, from knowing where to start writing our first line of code on a new feature to rubbing our temples over implementing a new logistics routine, and it is greatly multiplied with organizational altitude. Inaction becomes the undesired default when the vision is too far removed from what is right in front of us.
So how do we stare confidently into the depths of potential without becoming frozen with vertigo?
And speaking of confidence, what do we do when the dream has been sold too many times before and the people with the actual power to affect change have become disillusioned and no longer believe in such lofty ambitions?
[Change vertigo] is greatly multiplied with organizational altitude.
In that 1993 article, Treacy and Wiersema highlighted how organizations that meet the expectations of the market but strive to excel in one of three directions, can become market leaders. By investing heavily in operational excellence, product leadership or customer centricity, the authors argued that companies like Nike, Dell, and Home Depot outperformed the competition by creating consumer expectations that others were poorly equipped to meet. The key to success, they argued, is to set a goal for yourself in one of those three directions, and to invest in that growth once you’ve met the basic expectations of the market in the other two.
At Softhouse, we choose to express that mission as an exercise in placing yourself somewhere in this triangle:
If we are to run with the ideas outlined in the article, our hypothetical organization has to place themselves somewhere near one of these corners. Placing yourself firmly in the middle means you just meet the basic expectations of the market – we can’t cheat by saying we’ll be excellent in all three directions.
By asking yourself where you are in the triangle today, and where you want to be in the future, you can arrive at a change vector to give you one of those lofty, abstract visions for change, and it is an important first theoretical step – we must have a direction before we take the first step, but how do we translate that vision into action?
The next important step is reinterpreting that change vector as a change in the capabilities of the organization. What must we be able to do and deliver to meet these new expectations?
Every organization has some unique, or at least domain-specific, requirements but we want to argue that there are four Capabilities that every organization desiring change must master and that we can contextualize those within the framework of the triangle above.
These four capabilities are collaboration, learning, creativity, and responsiveness, and to translate our change vector into meaningful organizational goals we apply Treacy and Wiersema’s lens to those capabilities by putting them in this matrix:
In this example, our hypothetical company has decided they want to make an investment towards product leadership. They have identified that improving their interdepartmental collaboration to improve their operational excellence may free up much-needed resources to do so, that they must be better at learning from their increasingly engaged customer base, and that they must foster more creativity and faster response times to new opportunities. If they successfully improve these four capabilities, they will inhabit a corner of the triangle in line with their new strategic goal.
There may be many other industry-specific or even unique skills that this company must invest in, but they must, like every other company, certainly invest in these four.
Improve collaboration between departments to find opportunities to improve operational excellence is a much more manageable and concrete mission than Become a product leader.
Now that the company has translated the desired change vector into a less abstract delta of four capabilities, we have hopefully taken another step towards curing our change vertigo and given ourselves more manageable goals to achieve. Improve collaboration between departments to find opportunities to improve operational excellence is a much more manageable and concrete mission than Become a product leader.
But, if we are being honest with ourselves, the goal is still more abstract than we would like and we may still be faced with four (smaller) problems that give us vertigo. So how does one go about translating these desired improvements in Capability into everyday action?
We have worked with organizational change for over two decades, and have spent a lot of that time learning how to combat and prevent change vertigo. In our experience, there are few things that are as costly in terms of lost efficiency, output and morale as that overwhelming feeling of not knowing where to start implementing a change you’ve convinced yourself is absolutely needed, but beyond your current courage, understanding or reach.
”Our own open source fork of the Agile methodology”
One product of these two decades, and the hundreds of projects we have undertaken, is a model we have come to call the ChangeLab – our own open source fork of the Agile methodology, if you will – a framework that allows you to translate change requirements into a daily iterative cycle where the rubber hits the road.
The ChangeLab routines allow us to navigate complexity and create momentum
“If change and adaptation is not part of your everyday thinking, you’re inadvertently creating the company culture equivalent of technical debt,” explains my colleague Marcus Degerman, one of the architects behind the new methodology developed at the Softhouse think tank for management and change. “The ChangeLab routines allow us to navigate complexity and create momentum. Many small behavioral changes with measurable outcomes create the kind of momentum that cures vertigo and creates confidence in change.”
The ChangeLab is our way of converting top-down strategic ambitions into a grassroots change of company behavior so that change becomes a continuous and built-in part of your culture, rather than a periodic and taxing undertaking.
Marcus Degerman and Vadim Feldman helped develop the ChangeLab methodology at the Softhouse think tank.
On June 12th we’ll be hosting a seminar in Malmö, Sweden, on how to use ChangeLab to drive growth in your company. Sign up below for a physical seat, or tune in to our live broadcast to learn more about how to navigate complexity, combat change vertigo, and building change into your culture.
For more information contact:
Vadim Feldman at 076-031 10 60 or send an e-mail.